![](https://d.ibtimes.com/en/full/4488001/3.jpg?w=736&f=6c9909699cd2de3fb0a4d5bbd28d9b17)
Bitcoin and small stocks led Wall Street gains for another week as U.S. Treasury bond yields tumbled, making speculative assets more appealing than conservative investments.
Bitcoin was up 5.2% for the week, followed by the Russell 2000 small caps index, which was up 3.5%. These gains outperformed the 0.2% tech-heavy Nasdaq 100 Index gains and the S&P 500 index's 0.9% gains.
That's in contrast to a couple of months ago when big techs were in the driver's seat on Wall Street, meaning the recent equity rally broadens.
The catalyst behind the change in Wall Street fortunes is the tumbling in the yields of fixed-income securities following the release of lower inflation numbers throughout November. They make it more likely that the Federal Reserve will pivot in 2024 — shift from a restrictive to an accommodating monetary policy — meaning lower interest rates ahead.
The benchmark 10-year U.S. Treasury bond ended the week with a yield of 4.22%, down from 4.66% a couple of weeks ago and 4.92% six weeks ago.
Other long-term rates, like corporate bond yields and mortgage rates, have followed suit. The ICE BofA Single-A U.S. Corporate Index Effective Yield dropped from 6.22% at the end of October to 5.46% at the end of November. In addition, the 30-year fixed mortgage rate average dropped from 7.72% at the end of October to 7.22% at the end of November.
Lower bond yields and mortgages are a boon to interest rate-sensitive sectors like homebuilders and banks that have been rallying in the last six weeks.
Moreover, lower interest rates are bullish for speculative assets like smaller stocks and Bitcoin.
For smaller stocks, which trade like call options to distant earnings, lower interest rates make these earnings more valuable when discounted to the present.
For Bitcoin, lower interest rates mean a lower carry cost of the digital currency, as it offers no return to its holders.
The spread of Wall Street's gains from big technology stocks to interest rate-sensitive stocks and digital currencies — what some in the financial media call "everything rally" — is a positive "technical sign" for the overall market. It confirms that traders and investors rotate money across risky assets rather than from risk assets to safe assets like money market funds.
But it worries Fed officials, including Federal Reserve Chairman Jerome Powell, as inflation remains elevated on the service side of the economy and lingers in the commodity area. For instance, the CRB index rose from 283 last July to 308 at the end of November, while copper futures have rebounded since the middle of September.
"It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance or to speculate on when policy might ease," Powell said in a speech on Friday.
Rod Skyles, a blogger with The Unconventional Economist, shares the Fed's concerns about Wall Street running ahead of itself.
"Stocks will start the first full week of December at their highest point for 2023 and nearing January of 2022 all-time highs," he told International Business Times. "Lower rates have driven stocks and bonds much higher over the last several weeks, but commodity prices appear to be telling us inflation is not over quite yet, bringing the risk of some profit-taking in equities and debt markets."
Skyles sees the Everything rally continuing in December, powered by end-of-the-year Wall Street bonuses. But a slower pace than in November due to a slow-down in consumer spending and lingering inflation pressures.
"Early Black Friday numbers indicate some slowing in consumer spending," he said. "However, with government spending continuing to rise, there will continue to be upward inflation pressure."
Meanwhile, he casts a wary eye on commodity prices. "Commodity markets tend to be very data-driven and continue to indicate inflation remains strong, running counter to what interest rates have told us the last few weeks," he added. "Watch commodity prices closely, as they could indicate what happens next with rates and subsequently the direction of stock and bond markets."